One Year Later: How The Marijuana Black Market Is Affecting Local Dispensaries

LOS ANGELES (CBSLA) – It has been about a year since California rolled out the legalization of recreational cannabis, and now that dispensary owners have had a whiff of the weed business, some say the cost of running a legal pot shop is burning through their profits.

Jake Welty is the general manager at Captain Jack’s in San Bernardino. He says it’s a struggle to compete with lower prices at illegal pot shops, especially when the legal businesses have to add on the cost of three different taxes.

“Do I think the tax rate is too high? Absolutely, because I hear it every day from customers coming in the door,” he said. “Because the illicit market, the black market, is incredibly vibrant in California.”

Customers seemed to agree.

“There are other outlets where you can get it a lot cheaper,” Suzanne Urbanek said.

Welty said once they explain to customers that those taxes are factored into the prices, there’s no guarantee they’ll come back.

“It’s said every single day when they come through the door: ‘This is too tough, this is too high. I’m gonna have to pick up from x, y and z down the street,” Welty said.

State officials boasted that recreational cannabis could eventually bring in a billion of dollars a year in state tax revenue. They estimated that in the industry’s first year it would bring in $630 million in state tax revenue.

The actual tax revenue fell short – about $275 million less than projections.

The California Department of Tax and Fee Administration’s latest figures show the state collected only $228 million in state tax revenue for cannabis between January and October of 2018.

Gov. Gavin Newsom’s proposed budget for the fiscal year estimates a total of $355 million will be collected in state taxes by the end of the fiscal year.

“You know, they claim it’s the ‘Green Rush,’ but at the same time, we’re seeing the green rush out of our pockets,” said Smart Weed General Manager Sharif Elmazati.

We know why CA legislators “legalized,” marijuana…more tax revenues to spend, without accountability! Adding the excise tax of 15% was the greed factor. They did the same, and worse, with e-cigarettes that were helping tobacco smokers to quit, imposing taxes equaling 87%+ to the costs. Ex: $89 cost + $78 tax. Not much incentive in the journey to give up cigs.